Ally Financial Inc. · NYSE:ALLY
Ally Financial — Q4 2022 Earnings Presentation
60 slides from Ally Financial's earnings presentation, Jan 20, 2023
Slide 1: Ally Financial Inc. 4Q 2022 Earnings Review
4Q 2022 Preliminary Results Ally Financial Inc. 4Q 2022 Earnings Review January 20, 2023 Contact Ally Investor Relations at (866) 710-4623 or investor.relations@ally.com 1
Slide 2: Forward-Looking Statements and Additional Information
4Q 2022 Preliminary Results Forward-Looking Statements and Additional Information This presentation and related communications should be read in conjunction with the financial statements, notes, and other information contained in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and C
Slide 3: GAAP & Core Results: Annually
4Q 2022 Preliminary Results GAAP & Core Results: Annually ($ millions, except per share data) 2022 2021 2020 2019 2018 GAAP net income attributable to common shareholders (NIAC) $ 1,604 $ 3,003 $ 1,085 $ 1,715 $ 1,263 (1)(2) Core net income attributable to common shareholders $ 1,929 $ 3,146 $ 1,141
Slide 4: GAAP & Core Results: Quarterly
4Q 2022 Preliminary Results GAAP & Core Results: Quarterly ($ millions, except per share data) 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 GAAP net income attributable to common shareholders (NIAC) $ 251 $ 272 $ 454 $ 627 $ 624 Core net income attributable to common shareholders (1)(2) $ 327 $ 346 $ 570 $ 687 $ 7
Slide 5: 2022 Full-Year Highlights
4Q 2022 Preliminary Results 2022 Full-Year Highlights Focused Execution Leading, Growing Businesses Durable Returns $6.06 20.5% $8.7B 9.3% Adjusted Core Adjusted Total CET1 EPS(1) ROTCE(1) Net Revenue(1) Capital Ratio • Solid execution and momentum across Ally’s Auto, Insurance and Digital bank plat
Slide 6: Strategic Priorities Remain Intact
4Q 2022 Preliminary Results Strategic Priorities Remain Intact Navigating a challenging environment with a consistent focus on driving long-term value Ensure culture remains aligned with relentless focus on customers, communities, employees and shareholders Differentiate as a financial ally for our
Slide 7: Purpose-Driven Culture
4Q 2022 Preliminary Results Purpose-Driven Culture Ally’s ‘Do it Right’ values attract the best employees, foster an engaged workforce, and drive long-term value for customers, communities & stakeholders … who focus on caring and We invest in our people Which drives highly ‘Doing it Right’ for our a
Slide 8: Ally's Transformation Since 2014 IPO
4Q 2022 Preliminary Results Ally’s Transformation Since 2014 IPO Consistent execution against our long-term strategic priorities Auto & Insurance: Demonstrating Strength and Scale Ally Bank: #1 Largest, All-Digital Direct U.S. Bank1 Balance Sheet Diversification and Revenue Expansion Structurally En
Slide 9: Established, Leading Businesses
4Q 2022 Preliminary Results Established, Leading Businesses Growing and deepening customer relationships Auto & Insurance | Ally Bank 1 Unique, active customers per product line 58% increase since 2014 Ally Bank ~4M Customers 0.9M Auto & Insurance Customers ~7M 6.0M 179% CAGR in Multi-Product Custom
Slide 10: Balance Sheet Diversification
4Q 2022 Preliminary Results Balance Sheet Diversification Optimizing auto while growing new products End of Period Loans and Leases 95% Secured 26% increase since 2014 $33B Ally Home Ally Lending Ally Credit Card Corp Finance $5B Auto (Retail, Lease & Commercial) $113B $110B 26% CAGR (Balances since
Slide 11: Net Interest Margin
4Q 2022 Preliminary Results Net Interest Margin Transformation of balance sheet driving higher NIM NIM (ex. Core OID) 1 ↑134bps since 2014 Earning Asset Yield (EAY) EAY: 4.42% EAY: 4.39% EAY: 4.85% EAY: 4.49% EAY: 5.46% 1 Cost of Funds CoF: 1.98% CoF: 1.84% CoF: 2.31% CoF: 1.97% CoF: 1.71% (ex. Core
Slide 12: Adjusted Net Revenue
4Q 2022 Preliminary Results Adjusted Net Revenue Expanding revenue by optimizing both sides of the balance sheet Net Financing Revenue (ex. OID) | Adj. Other Revenue 1 2 74% increase since 2014 33% CAGR (Revenue contribution from Corporate Finance, Credit Card, Home, Invest and Lending): $127M $275M
Slide 13: Credit Risk Management
4Q 2022 Preliminary Results Credit Risk Management Reserved for various environments Consolidated: Annual Net Charge-offs | Coverage Levels 2.03% CECL Day 1 Retail Auto: Annual Net Charge-offs | Coverage Levels 3.34% 3.34% CECL Day 1 See page 45 for Net Charge-offs definition. Note: Coverage rate ca
Slide 14: Capital and Reserves
4Q 2022 Preliminary Results Capital and Reserves Strong capital position and healthy reserve levels Allowance for Loan Losses Common Equity Tier 1 (CET1) 1 10.6% 9.6% 9.4% 9.3% 9.1% $14.9B $14.6B $13.4B $13.0B $12.6B $3.7B $3.6B $3.1B $3.3B $3.4B $11.2B $11.0B $9.7B $10.3B $9.1B 2014 2016 2018 2020
Slide 15: Building Long-Term Intrinsic Value
4Q 2022 Preliminary Results Building Long-Term Intrinsic Value Adjusted tangible book value per share 1 92% increase since 2014 $44 (ex. OCI) $14 2 OCI Impact End of Period Shares Outstanding: 480M 467M 405M 375M 299M (1) Represents a non-GAAP financial measure. See page 50 for definition and detail
Slide 16: 4Q and Full-Year 2022 Financial Results
4Q 2022 Preliminary Results 4Q and Full-Year 2022 Financial Results Consolidated Income Statement 4Q 22 3Q 22 4Q 21 2022 2021 ($ millions, except per share data) Net financing revenue (ex. Core OID) (1) $ 1,685 $ 1,730 $ 1,663 $ 6,892 $ 6,205 (1) Core OID (11) (11) (9) (42) (38) Net financing revenu
Slide 17: Balance Sheet & Net Interest Margin
4Q 2022 Preliminary Results Balance Sheet & Net Interest Margin 4Q 22 3Q 22 4Q 21 Average Average Average ($ millions) Balance Yield Balance Yield Balance Yield Retail Auto Loans $ 83,781 7.98% $ 82,362 7.29% $ 77,979 6.61% Retail Auto Loans (ex. hedge impact) 7.37% 7.04% 6.81% Auto Leases (net of d
Slide 18: Net Interest Margin Dynamics
4Q 2022 Preliminary Results Net Interest Margin Dynamics NIM projected to reach ~3.5% as Fed Funds peaks • Rapidly rising rates and liability sensitive balance sheet creating near term NIM compression • Two largest portfolios respond differently to changes in benchmark rates – Retail Auto: Fixed rat
Slide 19: Capital
4Q 2022 Preliminary Results Capital • 4Q 2022 CET1 ratio of 9.3% Capital Ratios and Risk-Weighted Assets • Disciplined approach to capital allocation – Organic loan growth in consumer and commercial assets Total Capital Ratio – Executed $1.7 billion of repurchases in 2022. Currently Tier 1 Ratio ass
Slide 20: Asset Quality: Key Metrics
4Q 2022 Preliminary Results Asset Quality: Key Metrics Consolidated Net Charge-Offs (NCOs) Net Charge-Off Activity ($ millions) 4Q 19 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 Annualized Retail Auto $ 271 $ 94 $ 113 $ 108 $ 217 $ 347 NCO Rate Commercial Auto 10 - (1) (1) - - Mortgage Finance - - - (1) 1 - Corpo
Slide 21: Asset Quality: Coverage & Reserves
4Q 2022 Preliminary Results Asset Quality: Coverage & Reserves Consolidated Coverage Retail Auto Coverage ($ billions) ($ billions) Reserve (%) Reserve (%) Reserve ($) Reserve ($) Note: Coverage rate calculations exclude fair value adjustment for loans in hedge accounting relationships. Note: Covera
Slide 22: Optimized Retail Auto Origination Profile
4Q 2022 Preliminary Results Optimized Retail Auto Origination Profile Optimized origination profile through credit mix and risk-based pricing Retail Originations Mix by Credit Tier Two highest quality tiers consistently make up 75% of retail originations 2022 2022 Avg. FICO Price ∆ 744 +335bps 686 +
Slide 23: Used Vehicle Value Outlook
4Q 2022 Preliminary Results Used Vehicle Value Outlook Used vehicle value normalization consistent with prior guidance • End of period used vehicle values ended 2022 ↓19% versus December 2021 peak • Ally maintains a more conservative 2023 used vehicle value outlook than other industry forecasts – Fo
Slide 24: Retail Portfolio Vintage Performance
4Q 2022 Preliminary Results Retail Portfolio Vintage Performance Elevated losses on late 2021 – mid 2022 originations offsetting favorable performance on more seasoned vintages • Originations prior to 3Q 2021 continue to exhibit strong credit performance – Vintages have reached peaked loss timing wi
Slide 25: Retail Auto Quarterly NCO Trajectory
4Q 2022 Preliminary Results Retail Auto Quarterly NCO Trajectory 2023 Retail Auto NCO expectations reflect evolving macroeconomic environment and fully normalized portfolio performance • Current 2023 NCO outlook assumes further 13% decline in used values and mild recession in 2023 • Continue to expe
Slide 26: Risk Management
4Q 2022 Preliminary Results Risk Management Focusing on the controllables Prudent Risk Management • Front-end risk management remains a top operational focus area – Dedicated teams focused on credit strategy and asset performance monitoring – Decision strategy adjusted across several dimensions (e.g
Slide 27: Ally Bank: Deposit & Customer Trends
4Q 2022 Preliminary Results Ally Bank: Deposit & Customer Trends • Total deposits of $152.3 billion, up $10.7 billion YoY Total Deposits: Retail & Brokered ($ billions; EoP) – Retail deposits of $137.7 billion, up $3.0 billion YoY and $3.8 billion QoQ, reflecting solid growth and momentum Avg. Retai
Slide 28: Ally Bank: Leading, Growing & Diversified
4Q 2022 Preliminary Results Ally Bank: Leading, Growing & Diversified #1 2.7M 55 $138B 14 Largest All-Digital, Ally Bank Consecutive Quarters Retail Deposit Consecutive Years of Direct U.S. Bank(1) Deposit Customers of Customer Growth Balances Retail Deposit Growth • Leading, all-digital direct bank
Slide 29: Auto Finance
4Q 2022 Preliminary Results Auto Finance Inc / (Dec) v. • Auto pre-tax income of $437 million, reflecting strength and scale of industry leading franchise Key Financials ($ millions) 4Q 22 3Q 22 4Q 21 Net financing revenue $ 1,325 $ 22 $ (16) – Pre-tax income down YoY, primarily driven by historical
Slide 30: Auto Finance: Agile Market Leader
4Q 2022 Preliminary Results Auto Finance: Agile Market Leader #1 #1 #1 #1 Leading Prime Auto Bank Floorplan Bank Retail Auto Dealer Satisfaction Insurance Provider Lender(1) Lender(2) Loan Outstandings(3) J.D. Power Award(4) (F&I, P&C Products) Consumer Applications and Approval Rate Auto Balance Sh
Slide 31: Insurance
4Q 2022 Preliminary Results Insurance Inc / (Dec) v. • Insurance pre-tax income of $101 million and core pre-tax income of $52 million(1) Key Financials ($ millions) 4Q 22 3Q 22 4Q 21 Premiums, service revenue earned and other $ 305 $ 13 $ 22 – $305 million of earned premiums, up $22 million YoY, hi
Slide 32: Corporate Finance
4Q 2022 Preliminary Results Corporate Finance Inc / (Dec) v. • Corporate Finance pre-tax income of $67 million Key Financials ($ millions) 4Q 22 3Q 22 4Q 21 Net financing revenue $ 94 $ 14 $ 11 – Net financing revenue up YoY and QoQ reflecting higher asset (1) Adjusted total other revenue 25 (29) (2
Slide 33: Mortgage Finance
4Q 2022 Preliminary Results Mortgage Finance Inc / (Dec) v. • Mortgage pre-tax income of $19 million Key Financials ($ millions) 4Q 22 3Q 22 4Q 21 – Net financing revenue up YoY driven by asset growth Net financing revenue $ 55 $ (2) $ 13 Total other revenue 2 (5) (11) – Other revenue down YoY drive
Slide 34: Adjusted Noninterest Expense Trajectory
4Q 2022 Preliminary Results Adjusted Noninterest Expense Trajectory Focused on essentialism and efficient expense deployment ↑6% YoY Variable Costs All Other ~$4.9B Credit Driving ↑ Revenue $60M Normalization $60M Insurance $30M Discretionary $4.6B $100M 1 FDIC Fees investments partially ↑ Variable
Slide 35: Financial Outlook
4Q 2022 Preliminary Results Financial Outlook Consistent execution against long-term strategic objectives Adjusted Earnings Per Share Trajectory 1 Macro Economic Assumptions 12/30 Fwd Curve (FF Peak of 5%) $6 Unemployment Peak ~5% Negative GDP growth 1H 2023 ~$6 ~$4 Net Interest Margin ~3.5% Net Int
Slide 36: Near-Term CEO Priorities
4Q 2022 Preliminary Results Near-Term CEO Priorities Continue delivering for all our stakeholders Strong credit risk management Ensure robust cyber defense against increasing external threats Continue to prioritize culture and human capital Continue to drive operating efficiency and essentialism min
Slide 37: Supplemental
4Q 2022 Preliminary Results Supplemental 37
Slide 38: Results by Segment
Supplemental 4Q 2022 Preliminary Results Results by Segment Core pre-tax income Walk Inc / (Dec) v. ($ millions) Segment Detail 2022 2021 4Q 22 3Q 22 4Q 21 2021 3Q 22 4Q 21 Automotive Finance $ 2,250 $ 3,384 $ 437 $ 488 $ 839 $ (1,134) $ (51) $ (402) Insurance (38) 343 101 (30) 91 (381) 131 10 Deale
Slide 39: Funding Profile Details
Supplemental 4Q 2022 Preliminary Results Funding Profile Details Funding Mix Deposit Mix Brokered / Unsecured Other FHLB / Other Secured Retail CD Deposits MMA/OSA/ Checking Note: Totals may not foot due to rounding. Note: Other includes sweep deposits, mortgage escrow and other deposits. Totals may
Slide 40: Corporate and Other
Supplemental 4Q 2022 Preliminary Results Corporate and Other ($ millions) Inc / (Dec) v. • Pre-tax loss of $179 million and Core pre-tax loss of Key Financials 4Q 22 3Q 22 4Q 21 (1) $111 million Net financing revenue $ 172 $ (83) $ (1) Total other revenue 49 123 (24) Total net revenue $ 221 $ 40 $ (
Slide 41: Interest Rate Risk and Hedging
Supplemental 4Q 2022 Preliminary Results Interest Rate Risk and Hedging Net Financing Revenue Sensitivity Analysis (1) ($ millions) 4Q 22 3Q 22 Change in interest rates Gradual (2) Instantaneous Gradual (2) Instantaneous -100 bps $ (21) $ 21 $ 7 $ 95 +100 bps $ 3 $ (37) $ (3) $ (99) Stable rate envi
Slide 42: Deferred Tax Asset
Supplemental 4Q 2022 Preliminary Results Deferred Tax Asset Deferred Tax Asset 4Q 22 3Q 22(1) ($ millions) Gross DTA Valuation Net DTA Net DTA Balance Allowance Balance Balance Net Operating Loss (Federal) $ 428 $ - $ 428 $ 620 Tax Credit Carryforwards 960 (517) 443 425 State/Local Tax Carryforwards
Slide 43: Notes on Non-GAAP Financial Measures
Supplemental 4Q 2022 Preliminary Results Notes on Non-GAAP Financial Measures The following are non-GAAP financial measures which Ally believes are important to the reader of the Consolidated Financial Statements, but which are supplemental to, and not a substitute for, GAAP measures: Adjusted Earni
Slide 44: Notes on Non-GAAP Financial Measures
Supplemental 4Q 2022 Preliminary Results Notes on Non-GAAP Financial Measures 7) Core outstanding original issue discount balance (Core OID balance) is a non-GAAP financial measure for outstanding OID and is believed by management to help the reader better understand the balance removed from Core RO
Slide 45: Notes on Other Financial Measures
Supplemental 4Q 2022 Preliminary Results Notes on Other Financial Measures 1) Estimated retail auto originated yield is a financial measure determined by calculating the estimated average annualized yield for loans originated during the period. At this time there currently is no comparable GAAP fina
Slide 46: Additional Notes
Supplemental 4Q 2022 Preliminary Results Additional Notes Page – 8 | Ally’s Transformation Since 2014 IPO (1) Source: FDIC, FFIEC Call Reports and Company filings of branchless banks including Marcus, Discover, American Express, Synchrony. Page – 9 | Established, Leading Businesses (1) Customers inc
Slide 47: Additional Notes
Supplemental 4Q 2022 Preliminary Results Additional Notes Page – 32 | Corporate Finance (2) Noninterest expense includes corporate allocations of $13 million in 4Q 2022, $11 million in 3Q 2022, and $10 million in 4Q 2021. (3) Change in fair value of equity securities impacts the Corporate Finance se
Slide 48: GAAP to Core Results: Adjusted EPS – Annual
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted EPS – Annual Adjusted Earnings per Share ("Adjusted EPS") FY 2022 FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 Numerator ($ millions) GAAP net income attributable to common shareholders $ 1,604 $ 3,003 $ 1,085 $ 1,715 $ 1,263
Slide 49: GAAP to Core Results: Adjusted EPS – Quarterly
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted EPS – Quarterly Adjusted Earnings per Share ("Adjusted EPS") QUARTERLY TREND 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 1Q 20 4Q 19 Numerator ($ millions) GAAP net income / (loss) attributable to common sh
Slide 50: GAAP to Core Results: Adjusted TBVPS – Annual
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted TBVPS – Annual Adjusted Tangible Book Value per Share ("Adjusted TBVPS") FY 2022 FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 Numerator ($ billions) GAAP shareholder's equity $ 12.9 $ 17.1 $ 14.7 $ 14.4 $ 13.3 $ 13.5 $ 13.3 P
Slide 51: GAAP to Core Results: Adjusted TBVPS – Quarterly
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted TBVPS – Quarterly Adjusted Tangible Book Value per Share ("Adjusted TBVPS") QUARTERLY TREND 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 1Q 20 4Q 19 Numerator ($ billions) GAAP shareholder's equity $ 12.9 $
Slide 52: GAAP to Core Results: Core ROTCE – Annual
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Core ROTCE – Annual Core Return on Tangible Common Equity ("Core ROTCE") FY 2022 FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 Numerator ($ millions) GAAP net income attributable to common shareholders $ 1,604 $ 3,003 $ 1,085 $ 1,715 $
Slide 53: GAAP to Core Results: Core ROTCE – Quarterly
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Core ROTCE – Quarterly Core Return on Tangible Common Equity ("Core ROTCE") QUARTERLY TREND 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 1Q 20 4Q 19 Numerator ($ millions) GAAP net income attributable to common share
Slide 54: GAAP to Core Results: Adjusted Efficiency Ratio – Annual
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted Efficiency Ratio – Annual Adjusted Efficiency Ratio FY 2022 FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 Numerator ($ millions) GAAP noninterest expense $ 4,687 $ 4,110 $ 3,833 $ 3,429 $ 3,264 $ 3,110 $ 2,939 Rep and warrant
Slide 55: GAAP to Core Results: Adjusted Efficiency Ratio – Quarterly
Supplemental 4Q 2022 Preliminary Results GAAP to Core Results: Adjusted Efficiency Ratio – Quarterly Adjusted Efficiency Ratio QUARTERLY TREND 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 Numerator ($ millions) GAAP noninterest expense $ 1,266 $ 1,161 $ 1,138 $ 1,122 $ 1,090 Rep and warrant expense - - - - - Insur
Slide 56: Non-GAAP Reconciliation: Core Income – Annual
Supplemental 4Q 2022 Preliminary Results Non-GAAP Reconciliation: Core Income – Annual ($ millions) FY 2022 FY 2021 FY 2020 Core OID & Change in fair Core OID & Change in fair Core OID & Change in fair GAAP Repositioning value of equity Non-GAAP (1) GAAP Repositioning value of equity Non-GAAP (1) GA
Slide 57: Non-GAAP Reconciliation: Core Income – Annual
4Q 2022 Preliminary Results Non-GAAP Reconciliation: Core Income – Annual ($ millions) FY 2019 FY 2018 FY 2017 FY 2016 Core OID & Change in fair Core OID & Change in fair Core OID & Change in fair Core OID & Change in fair GAAP Repositioning value of equity Non-GAAP (1) GAAP Repositioning value of e
Slide 58: Non-GAAP Reconciliation: Core Income – Quarterly
Supplemental 4Q 2022 Preliminary Results Non-GAAP Reconciliation: Core Income – Quarterly ($ millions) 4Q 22 3Q 22 4Q 21 Change in fair Change in fair Change in fair (1) (1) GAAP Core OID value of equity Repositioning Non-GAAP GAAP Core OID value of equity Repositioning Non-GAAP GAAP Core OID value
Slide 59: Non-GAAP Reconciliations – Annually
Supplemental 4Q 2022 Preliminary Results Non-GAAP Reconciliations – Annually Net Financing Revenue (ex. Core OID) ($ millions) FY 2022 FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016 GAAP Net Financing Revenue [x] $ 6,850 $ 6,167 $ 4,703 $ 4,633 $ 4,390 $ 4,221 $ 3,907 Core OID 42 38 36 29 86 71 57
Slide 60: Non-GAAP Reconciliations – Quarterly
Supplemental 4Q 2022 Preliminary Results Non-GAAP Reconciliations – Quarterly Net Financing Revenue (ex. Core OID) QUARTERLY TREND ($ millions) 4Q 22 3Q 22 2Q 22 1Q 22 4Q 21 3Q 21 2Q 21 1Q 21 4Q 20 3Q 20 2Q 20 1Q 20 4Q 19 GAAP Net Financing Revenue [x] $ 1,674 $ 1,719 $ 1,764 $ 1,693 $ 1,654 $ 1,594